# Test 1 Interpretation: Channel Switching

## Replication of Earlier Papers (Base Spec, Full Panel)

- Trade balance: Z₁ = -105.7 (p = 0.0000)
- Primary income: Z₁ = 4.0 (p = 0.2820)
- Non-S-I residual: Z₁ = 374.3 (p = 0.0000)

## EMU Interaction (Channel Switching Test)

- Trade: Z₁ (non-EMU) = -110.4, Z₁×EMU = -191.5 (p = 0.0006)
  → EMU total = -301.9
- Income: Z₁ (non-EMU) = 4.7, Z₁×EMU = 9.5 (p = 0.6424)

## Verdict

**CHANNEL SWITCHING CONFIRMED**: Demographics work through income/non-trade in the 
general panel but Z₁×EMU activates the trade channel within monetary union. 
The Phase 12 and Papers 9A/13 findings are not contradictory — they are 
regime-contingent. Monetary union doesn't just amplify the demographic CA 
effect; it changes the channel through which it operates.
